County has new buyer for railroad

February 7, 2013

EAST LIVERPOOL - Another potential buyer found for the Columbiana County Port Authority's railroad is planning to continue operating the railroad and use the right-of-way to run water lines to drilling sites.

The Port Authority board on Wednesday approved a tentative agreement to sell the former Youngstown & Southern Railroad to Aqua Infrastructure LLC for $3 million. Under the non-binding letter of intent to sell, Aqua is required to make a down payment of $50,000 and has until June 30 to decide whether to consummate the deal.

"We're confident in our homework so far ... We don't think there will be any bar to getting this wrapped up," said Bill Davis, vice president for corporate development for Aqua.

The company is a subsidiary of Aqua America Inc., a private water supplier operating in 10 states, including Ohio. "We are, in fact, the largest private company operating in the state of Ohio," he said.

While Davis said Aqua intends to keep the railroad operating and look for new customers, they also are interested in running a water line along the railroad right-of-way, with secondary lines transporting water to and from oil and gas wells expected to be drilled in the area over the coming years.

An estimated 4.5 million gallons of water are needed to "frack" a well, which is the process used to release oil and natural gas deposits trapped in the shale formations located underground. Being able to run water lines to well sites eliminates the need to transport the water by tanker truck, reducing traffic congestion and wear-and-tear on local roads.

Aqua operates a water pipeline system that serves drilling sites in Lycoming and Tioga counties in north-central Pennsylvania, and Davis said they have seen first-hand the problems created by heavy truck traffic.

"But if you came at it with a pipeline like we have in Pennsylvania, you end up removing ... a lot of truck traffic from the roads," he said, "and that's what we think might happen in this part of Ohio."

Davis said they would begin work on this phase after securing the necessary commitments from drilling companies. "Installing a water line is a rather expensive investment, so you want to make sure you have customers interested in utilizing it," he said.

Most of the 36-mile railroad, which runs from Darlington, Pa., to Youngstown, passes through Columbiana County. Davis said their first job would be to make improvements to the railroad bed.

"We want to make it stable, safe and secure and can accommodate the traffic there. It's experienced deferred maintenance for a while," he said of the railroad.

Aqua also wants to begin finding railroad customers. "It's important to us that the railroad continue as a vital entity, and right now people are questioning its longevity," Davis said.

The railroad's only customer in recent years has been the company that operates the construction and demolition debris landfill in Negley. Officials said that while the landfill remains open, there has been no activity for some time.

Although this is the company's first attempt at running a railroad, Davis said they have done their homework and are confident they can make it a viable proposition given its proximity to the drilling boom underway in the region. He said well sites need fracking sand, pipelines and other supplies, all of which can be transported by rail.

"To do that, we have to ensure the railroad is up to standards ... and we're willing to put the money in to see that it's done," he said.

Under the letter of intent, the Port Authority is required to return the $50,000 down payment should there be a problem with the title to the railroad or the sale fails to receive the necessary approval of federal regulators.

The Port Authority has been trying to sell the railroad for years, but each deal has eventually fallen through. The latest was last year, when the Port Authority entered into a letter of intent to sell the railroad to Tervita Corp., which currently operates the Negley landfill. Tervita pulled out of the $2.9 million deal after saying it uncovered contamination issues with two pieces of railroad property.

The Port Authority believes the contamination claims were exaggerated, and Davis indicated the problems do not appear to be a barrier to the proposed sale. "We believe it is manageable," he said.